A larger-than-average slew of retail bankruptcies and stores being shuttered astounded the industry this year, making headlines and dragging even some of the better-performing firms such as Home Depot, TJ Maxx and Costco down with the sad news.
So far in 2017, 6,985 store closure announcements have been intimate, according to a tracker from FGRT (formerly Fung Global Retail & Technology). That’s up sundry than 200 percent from a year ago, based on the firm’s declarations.
“Store closures are a major theme in U.S. retail, as many overspaced retailers are acting to the migration of sales online by closing physical locations,” FGRT’s Deborah Weinswig wrote in a modern note to clients.
Still, shoppers may not yet realize the full impact of these exchanges. While announcements were made by retailers such as Charming Charlie, Perfumania, Crocs and GameStop, aggregate others, some have yet to shutter their doors. The closure may not up with until 2020, in some cases.
Ascena Retail Group, for instance, which owns names such as Dressbarn, Loft and Ann Taylor, could about as many as 667 stores by mid-2019, depending on how negotiations pan out with U.S. mall and department storing center landlords.
Heading into 2018, some of those landladies feel as if they have more authority and won’t allow retailers’ doors to place off limits without a fight.
A recent court ruling in favor of the largest U.S. mall possessor, Simon Property Group, blocked Starbucks from closing all of its Teavana accumulates across Simon’s properties as planned. Instead, Starbucks must adhere to an manipulating covenant within their contracts.
The news sparked cheers from other retail verified estate investment trust CEOs, which discussed the implications at a late conference arranged by the International Council of Shopping Centers in New York, clapping Simon.
Simon’s moves could give REITs the push and paradigm they need to try to prevent an onslaught of store closures from occasion. However, some restructuring advisors (on the flip side) say they hand down begin to ask their clients to close stores abruptly, leaving as petty room as possible to negotiate with any landlord or be sued as Starbucks was.
Gap and J.Team are other apparel names that have announced plans to hide some locations over the next year to two years, but the retailers haven’t set a dogged date. H&M, which reports its full-year results late next month, is also demanded to open fewer stores than planned next year and choose begin to close some of its doors.
According to FGRT, the most closure bulletins so far stem from RadioShack, Payless and Rue21, all of which filed for bankruptcy defence in 2017. Sears Holdings, Gymboree, The Limited and hhgregg are also at the top of that slant, with Sears being the only name that hasn’t yet started bankrupt.
More store closures are expected to come from the stepfather of Sears and Kmart, which has said it plans to continue to use its real order to unlock cash in a bid to return to profitability and operate with a leaner concrete footprint.
Toys R Us, having just filed for bankruptcy protection in September, is also now rumored to be making allowance for closing underperforming locations, especially those in proximity to other toy stockpiles.
“I think the big theme is companies have really over-levered themselves,” Out of sorts’s analyst Christina Boni told CNBC. “If they can’t make grave investments, they have to ask themselves if it makes sense to plod on another year or if it’s of outdo interest in the long term … to make a better [store] formation.”
This past year, department store chains Macy’s, J.C. Penney and Sears came into the post-holiday inform oning season with news of store closures, which sent retail caches tumbling.
On a brighter note, there are still retailers opening believe ins across the U.S., though those numbers haven’t been as pronounced. Around 3,400 openings have been announced so far in 2017, according to FGRT. The fastest-growing prestiges have been Dollar General, Dollar Tree, Aldi and TJX (the holder of TJ Maxx and HomeGoods).
Beauty retailers Ulta and Sephora continue to enlarge their footprints, while companies including Target, Nordstrom and Forever 21 are also send-off more stores but testing smaller locations.
The S&P 500 Retail ETF (XRT) is fetching up for many of the past months’ losses, as Wall Street awaits fourth-quarter earnings, which catalogue key holiday sales figures and inevitably additional closure announcements.